New Treasury guidance requires large-scale solar projects to use Physical Work Test for ITC safe harbor
On August 15, the Department of the Treasury Released new guidance Related to safe projects of solar energy under the ITC in response to an executive order in July of President Trump. Safe Harboring enables companies to demonstrate a good faith voltage to start a solar project to secure the applicable tax credits that year.
Treasury Safe Harbor changes from 9/2/2025
- Projects> 1.5 MW must use physical work test
- Physical work test has been reduced and does not include “provisional activities”
- Projects that use physical work test must enforce “continuous construction program”
- Projects <1.5 MW can still use five percent safe haven
- All projects have been employed for another four years under continuity Safe Harbor
The new guidelines require projects that are larger than 1.5 MW to use the physical work test to secure the ITC – the method that shows that considerable physical work has started on a site. Large projects can no longer use the safe port of five percent – the method that shows that significant costs have been incurred for the project. The guidance also limits the physical work test to “the installation of racks or other structures to apply photovoltaic (PV) panels, collectors or solar cells to a location.” It does not include “provisional activities” such as assessing the country, conducting studies or cleaning up a site. The guidance also requires projects that use the physical work test to “maintain a continuous construction program”, where the “physical work that is being carried out is of an important nature”.
The guidelines did not increase the required percentage for the safe port of five percent, which, as the name suggests, remains 5%. It also did not change the amount of time that developers have to employ a safe eye scissors project, whether it is about the physical work test or five percent safe port. That continuity Safe Harbor period is still set at four years.
The new rules will take effect on 2 September 2025 and are not retroactive.
Solar -Industry groups expressed the changes, but Roth Capital Partners said that the guidelines was ‘considerably better than expected’.
“The new guidelines of the Ministry of Finance to further limit the tax credits of energy tax is part of an unprecedented silk that has concluded the administration with anti-Rean Energyologists to undermine the congress and further harm the American sun industry,” said Abigail Rossper, President and CEO of the SEIA. “This is a blatant rejection of what the congress has taken in HR 1, and it threatens thousands of small companies throughout the country that are the backbone of our clean energy economy.”
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